On October 4, Jack Ablin shared his view on the market movement in CNBC’s Trading Nation. Ablin is Cresset Asset Management’s chief investment officer. He said, “I believe we’re entering a cyclical downturn.” He also said, “the market could respond downward 10 to 15%.” Apple (AAPL) is Cresset Asset Management’s largest holding. The fund invested around 27.7% of the total corpus in the stock.
US equity indexes
The S&P 500 Index and the Dow Jones Industrial Average Index already touched an all-time high in July. Over the last five years, they returned 50% and 56.2%, respectively. In the current scenario, both of the indexes are trading marginally lower from their all-time high level. However, Ablin thinks that we could see a 10%–15% retrenchment in the market in early 2020. According to Ablin, certain factors cause uncertainty in the market. The factors include the upcoming 2020 presidential election, the ongoing US-China trade war, and President Trump’s possible impeachment.
Jack Ablin on economic indicators
Jack Ablin also said, “The economic condition here at home isn’t too conducive for risk-taking. The manufacturing ISM came in lousy. We saw non-manufacturing slightly better, but still disappointing.”
The ISM manufacturing PMI for September was 47.8%, which is lower compared to 49.1% in August. The production index also slowed down in September. The production index was 47.3% in September compared to 49.5% in August. Notably, the lower manufacturing PMI and production index signal that the overall demand is less, which impacts business confidence. The employment index also contracted by 1.1 percentage points on a month-over-month basis.
After the business cycle peaks in an economy, it enters into a cyclical downturn. US economy expanded for the last 11 years—the longest market bull run, which could be the tip of the iceberg. Consumer demands and household consumption could weaken if income saturates.
Jack Ablin said, “As a data guy, it’s really hard to navigate the headlines. That would allow us to take some of the dry powder that we’ve put aside over the last several months and redeploy it back into the market.” In August, Ablin shifted 30% of his portfolio into private equity and cash. He was concerned about market volatility.
Cresset’s top holdings
Cresset Asset Management’s other top holdings in the second quarter were the iShares Russell 1000 Growth ETF, the iShares Core S&P Small-Cap ETF, the iShares Core S&P Mid-Cap ETF, and the iShares Russell 1000 Value ETF. These securities represented 7.48%, 6.44%, 6.02%, and 4.41% of the firm’s portfolio in the second quarter.
In the second quarter, the firm reduced some of its position in Apple. Cresset Asset Management holds 4.4 million Apple shares with a total investment of $0.8 billion. Apple stock has returned 43.9% on a year-to-date basis as of Monday. The S&P 500 Index has returned 17.2% during the same period.
Cresset’s portfolio by sector
Cresset Asset Management has a strong position in the financial and IT sectors. The firm has moderate exposure in other sectors. The financial sector represents 44.22% of the firm’s portfolio. The IT sector represents 33.06% of Cresset Asset Management’s total holdings. The firm has the lowest holdings of 0.9% in the utilities and telecommunication sectors.
Cresset Asset Management reduced some of its holdings in the iShares Russell 1000 Value ETF, the iShares MSCI ACWI ETF, NIKE, and the iShares MSCI Emerging Markets ETF by 1.22, 0.57%, 0.37, and 0.28 percentage points, respectively. The firm completely sold its position in Tortoise Energy Infrastructure, Hasbro, Neurocrine Biosciences, and SolarEdge Technologies in the second quarter.